Illinois debt soon likely to be junk: S&P

Crain's Chicago Business reports:

Odds are greater than even that Illinois debt officially will be rated junk—and soon—if lawmakers do not resolve an impasse with Gov. Bruce Rauner and enact a new budget by the beginning of the state's new fiscal year on July 1.

That was the word from S&P Global Ratings today as the New York financial firm turned up the pressure another notch in a political feud that shows no sign of breaking soon.

In a call with reporters, analysts at S&P, which on June 1 moved state debt to just one level above junk, said that without a budget, the state's rating could drop more than one notch.

"We think (a further downgrade) is above one in two likelihood around the time" the fiscal year 2018 begins on July 1, said Gabriel Petek, a managing director and sector leader for the firm. "This situation definitely is moving quickly if they don't have a budget."

Passing a temporary stop-gap budget—something Rauner has vowed to veto without Democratic concessions—"would be helpful" if only because it would provide cash to some programs and units that now are totally without help. It also "might result in us having a less than one notch" downgrade. But without new revenue, too, "the fiscal situation could continue to erode," he added.

Overall, the fiscal harm being done to the state is caused by "political" factors, Petek said. "It's willingness to pay, not (the state's) ability to pay."

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